LLC offers better legal protection.3) Setting up in states that allow your identity to be hid is also overblown.

Not only does it hurt the returns, it is a very attractive target for ambulance-chasing lawyers and title fraud.  

I'm not sure how they paid so that may or may not be a solution here...The other thing is technically your tenant owes you still, and the prior LL may be liable for fraud.

In that case you do bear the responsibility when said supplier turns out to be a fraud dont you think?

They are not secured investments and you have very little protection outside of out right fraud laws.

Then there’s fraud or misrepresentation, where borrowers inflate project values or provide false documentation.

To omit that unreported loan is considered to be bank fraud.

After all rape is just the word of the victim that it was not consensual sex, breaking and entering, well the door was already broken, every theft, every credit card fraud, well the owner said I could. 

I want to give them the benefit of the doubt they are just struggling with staffing but now have seen some red flags that lead me to believe there might also be some type of deceit/fraud and possible financial trouble.

On a worldwide basis, the US is considered a business haven where many can hide their identities.